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Why the Mobile Embrace Ltd share price plunged 21% lower today

One of the biggest movers on the market today was the Mobile Embrace Ltd (ASX: MBE) share price.

But unfortunately for its shareholders it was a significant move lower. The mobile marketing and carrier billing company’s shares finished the day lower by a whopping 21% to 5.9 cents.

This means that Mobile Embrace’s shares have now plunged over 80% since this time last year.

Why did its shares sink lower?

The catalyst for today’s decline was the release of its full-year results after the market closed on Thursday.

In FY 2017 Mobile Embrace saw revenue fall 13% to $52.5 million and profit after tax plunge 67.5% to $1.6 million.

This was largely the result of issues with the company’s Carrier Billing business that forced it to shift its focus almost entirely to its Performance Marketing business.

Earlier this year the company advised that external factors were impacting its Carrier Billing operations and that in order to better manage future earnings risk, it would put marketing activities on hold and reduce spend across the segment.

Unfortunately this remains the case and the company will continue to focus predominantly on its Performance Marketing business in FY 2018.

Despite this, though, management does expect the higher margin business will help the company generate a stronger EBITDA result in FY 2018 off a lower revenue base. So things are looking a touch more positive in my opinion.

Should you invest?

Whilst its shares have fallen sharply this year and things could improve in FY 2018, I wouldn’t be in a rush to make an investment.

I would suggest investors hold off until its half-year results are announced to wait and see if the company’s transformation is coming along successfully.

In the meantime, I would suggest investors look at quality small-cap tech shares such as GetSwift Ltd (ASX: GSW) or Swift Networks Group Ltd (ASX: SW1) instead.

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Motley Fool contributor James Mickleboro owns shares of GetSwift Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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